Will Facebook’s 3Q Earnings Top Analysts’ Projections?

With Facebook set to announce its third-quarter earnings Wednesday, Oct. 30, at 2 p.m. PT/5 p.m. ET, the average projections from Wall Street are $1.89 billion in revenue and earnings per share of $0.18, Seeking Alpha reported.

WallStreet650With Facebook set to announce its third-quarter earnings Wednesday, Oct. 30, at 2 p.m. PT/5 p.m. ET, the average projections from Wall Street are $1.89 billion in revenue and earnings per share of $0.18, Seeking Alpha reported.

Seeking Alpha noted that Facebook has surpassed analysts’ expectations for the past four quarters, with a particularly strong showing in the second quarter of this year, when its revenue total of $1.8 billion was $200 million above analysts’ consensus estimate of $1.6 billion.

As for EPS, the social network also beat analysts’ expectations in three of the past four quarters, with the first quarter of 2013 representing the lone exception, as the company’s actual EPS of $0.12 fell one cent short of Wall Street’s $0.13 projection.

How will Wall Street react to Facebook’s third-quarter earnings call? Based on the past four quarters, the answer is tough to predict, as Seeking Alpha noted that the effects on Facebook shares have been all over the place:

  • 3Q 2012: +10 percent
  • 4Q 2012: -10 percent
  • 1Q 2013: +1 percent
  • 2Q 2013: +25 percent

Seeking Alpha Contributor Justin Giles concluded:

Since last year, shares are up more than 100 percent. So the million-dollar question remains: Should investors sell or hold their shares through earnings?

That is a very tough question. Given the explosive run that Facebook has been on since mid-July, I would be somewhat hesitant going into earnings. I feel there is definitely more downside risk than upside potential in this stock. With Facebook continuing to make new highs, I feel that this earnings report is a classic case of “buy on the rumor, sell on the news event.”

With its recent closing price of $51.90, Facebook currently trades at a P/E (price to earnings ratio) of 234, and a forward P/E of 52. As we can see, Wall Street has certainly priced a lot of growth into this stock. These are some of the reasons why I would take a more cautious approach with Facebook heading into earnings.

Of Wall Street recommendations, the average opinion on Facebook is a buy, with an average price target of $52.44.

Readers: What do you expect from Facebook’s third-quarter earnings call Wednesday?

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